eBay rejects GameStop’s $56B offer: “Your proposal is neither credible nor attractive”

In a decisive move, eBay's board has turned down GameStop's staggering $55.5 billion bid to acquire the company. Paul Pressler, eBay's chairman, communicated this decision in a letter addressed to GameStop CEO Ryan Cohen, stating that the proposal lacked credibility and attractiveness. Pressler elaborated that the board, in conjunction with its independent advisors, conducted a comprehensive evaluation of GameStop's unsolicited offer. They identified multiple significant issues that led to their conclusion. Key factors included eBay's potential for independent growth, uncertainties surrounding GameStop's financing proposal, and how the acquisition might affect eBay's long-term profitability. Furthermore, Pressler noted concerns regarding operational risks, leadership structures of a potential merged company, and the overall implications for valuation stemming from these elements. GameStop's unexpected offer emerged just last week and has raised eyebrows in the financial community. According to reports, Cohen hinted at the possibility of pursuing a hostile takeover, suggesting he might present the offer directly to eBay shareholders, potentially through a special meeting. During a somewhat uncomfortable interview on CNBC, Cohen struggled to clarify how GameStop would finance such a significant acquisition. eBay's market cap is currently over four times that of GameStop, which has raised questions about the feasibility of the offer. GameStop claimed it could secure up to $20 billion in debt financing, proposing a purchase price of $125 per share, split evenly between cash and GameStop stock. However, analysts pointed out discrepancies in GameStop's financial calculations, which did not adequately cover the proposed total. The rejection letter from eBay also referenced GameStop's governance issues, particularly concerning Cohen's performance-based stock options. Unlike traditional compensation, Cohen's pay is contingent on GameStop achieving a market cap of $100 billion and $10 billion in cumulative earnings, which currently seems a distant target for the company, valued at approximately $10.2 billion. As the situation develops, GameStop has been approached for comments, and updates will follow if they respond.